Carlsberg Raises Forecast on Cost Cuts, Eastern Europe SalesBy
Brewer sees operating profit rising 5% on organic basis
Eastern Europe sales rose 16% in third quarter, fueling growth
Danish brewer Carlsberg A/S raised its 2016 earnings forecast, boosted by speedier cost cuts and stronger demand in its perennial weak spot of eastern Europe.
Organic operating profit will rise about 5 percent, Carlsberg said Wednesday, compared with its August forecast for low single-digit growth. The stock was unchanged as of 11 a.m. in Copenhagen, after gaining as much as 3.1 percent.
Chief Financial Officer Heine Dalsgaard said the Tuborg maker is slightly ahead of schedule in its plan to cut as much as 2 billion kroner ($297 million) in costs, having shut 11 breweries in China. Eastern European sales rose 16 percent on an organic basis in the third quarter, more than triple the average analyst estimate, benefiting from a recovery in Russia, where Carlsberg is the largest brewer.
“In eastern Europe, Carlsberg seems to have become a more aggressive market leader, being sharp on pricing,” wrote Nikolaas Faes, an analyst at Bryan Garnier.
Price increases and warm weather also boosted results in the region, where Carlsberg’s sales have almost halved in the last five years amid a slump in the price of oil and high inflation. Analysts expected eastern Europe sales would rise 4.9 percent.
“After many quarters of decline, eastern Europe seems to be bottoming out, but Russia is still Russia so we’ll have to see,” Chief Executive Officer Cees ’t Hart said on a call with reporters. The company expects the country’s beer market to shrink by between 4 percent and 5 percent in 2017, he said, because of the imposition of limits on bottle sizes.
Russia will ban sales of beer in plastic bottles larger than 1.5 liters next year, seeking to reduce binge drinking in the country. Sales of bigger bottles rose in the third quarter ahead of the new rule, which restricts production in January and sales from July.
The CEO said the choice of the U.S. electorate must be respected, and a Donald Trump presidency won’t affect the company’s alliance with Brooklyn Brewery, under which it distributes Brooklyn beers in some European markets including the U.K.
’t Hart also said the brewer is involved in Vietnam’s process of selling a stake in Hanoi Beer Alcohol Beverage Corp., and he can’t comment further. The Danish company owns 17.5 percent of the maker of Truc Bach pale lager.
Adverse currency swings will cut 550 million kroner from full-year earnings, less than the 600 million kroner previously forecast, Carlsberg said.